Business taxes hurt the economy.

By John Stephen
At the tax summit held by the New Hampshire Legislature last week, one critical nugget stood out. Scott Hodge, president of the nonpartisan Tax Foundation, offered tremendous caution about our business tax climate.

With New Hampshire's high 8.5 percent business profits tax coupled with a business enterprise tax, our state has one of the highest business taxes in the nation. This, in part, results in nearly 16 percent of our workforce working out of state, the third highest rate nationally.

Our low personal taxes are bringing people here to live, but our high business taxes are forcing people to work elsewhere. If we want a thriving economy with robust job growth to match our outstanding quality of life, we must get our business tax structure to look more like how we tax people: as little as possible.

While we learned at last week's tax summit that we need to cut business taxes to jumpstart our economy, it was this week's spending summit that we must focus on to make reducing taxes a reality. As Gov. Meldrim Thomson said over 30 years ago, "Low taxes are the result of low spending."

We can't have a serious discussion about cutting business taxes until we are prepared to do the hard work to cut spending and make New Hampshire government run efficiently.

Traveling across the country, I have had the opportunity to see what does and doesn't work. New Hampshire is falling behind every day as other states zoom by us, implementing best practices taken from the private sector, while our state government sits idle and maintains the status quo.

We need to employ a culture of change where we start treating taxpayer money as we would our own. For example, we need to stop tying the hands of our state department heads by requiring that they submit budgets that keep doing things exactly the same way we have always done them. This leads to the "tyranny of custom" that ruins new ideas. We should require them to use their knowledge and experience and come forward with good ideas to save money for the taxpayers through the budget process.

We also need to follow the lead of 43 other states and give New Hampshire's governor line-item veto authority to cut wasteful spending and make budgets more efficient. At the same time, we should take the lead of Louisiana and put all state expenditures online, so people can see exactly where their tax dollars are going.

Other states, like New York and Wisconsin, have moved to consolidate business functions, like human resources, finance and purchasing, while New Hampshire continues to operate inefficiently. Texas and Oregon have become leaders in bringing Medicaid costs down by implementing aggressive managed care for beneficiaries, while we have kept an outdated fee-for-service model. Indiana has created a balanced scorecard approach to management to set program benchmarks and eliminate services that can't produce results; we have done nothing but give taxpayers more government, regardless of how effective it is.

These are critical steps that could save hundreds of millions of dollars and allow us to give tax relief to New Hampshire companies that would let them grow and create jobs, which are so critical in today's economy.

If we could just play catch-up with the rest of the states, we would be able to get out of this recession faster and better than our neighbors. If New Hampshire could then take the next step and become a leader in state innovation, we would be the envy of the country in growth.

John Stephen was the Commissioner of Health and Human Services from 2003 to 2007.